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Changes to Forex Payment Processing Regulations
Forex trading, especially the retail variety, takes a bad rap for being loosely regulated, thus creating a trading environment in which rife speculation leads to currency volatility. In an effort to address the issue of insufficient regulation, the National Futures Association announced in late 2014 that a ban on funding forex trading accounts via credit cards would be enforced beginning January 2015.
While transactions made through debit cards are still acceptable, the restriction is supposed to address the situations in which customers will risk and lose large sums of money that are borrowed on interest. In order to figure what the origin of the funds is, the brokers are now required to screen their customers appropriately, something difficult to achieve in such a fast-paced industry.
If licensed brokers find doing business becomes increasingly difficult in the face of progressively restrictive regulations such as the ban on the use of credit cards, unlicensed brokers are likely to meet with additional hurdles. While many companies that offer merchant services prominently display on their website the ease with which a broker can obtain online payments, this accessibility is frequently misleading. Unlicensed forex brokers are most vulnerable to having their business disrupted due to the discrepancy that exists between the way online payments services are presented and how things turn out subsequently.
Forex Payment Processing
The main issue results from the fact that merchant services companies will frequently accept an unregulated forex broker, process some transactions, then freeze the money in the merchant account until additional and potentially time-consuming verifications are made. The merchant services company may ask from the broker proof of them being licensed, and if this is not provided, the money that has been charged will be returned to the trader.
This decision can have disastrous consequences on the broker who would have already taken decisions based on the purchase, decisions that are now unprofitable by the freezing or returning of the funds. In addition, traders themselves will have their plans hindered by the inaccessibility of the funds they intended to use for trading.
So when it comes to online payment processing, it is essential for a forex broker to avoid this pitfall and make sure that the merchant services company has inclusive policies for all types of brokers. While the ease of obtaining the services is preserved,
Forex merchant accounts are considered high risk by banks and processors. Still, payment processing is available for the industry.
US accounts can be established for card processing for informational and software products. International merchant accounts can be established for trading platforms that need card processing.
Alternative payments add great value to trading platforms. For example, electronic checks are a highly effective alternative payment method for US traders. International traders can use local bank transfers.
The more ways traders can fund accounts the more profits can be made.
Are you seeking a Forex merchant account?
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